GRPN Stock: The Perfect Stocking Stuffer

Just like with traditional retailers, a big chunk of the revenues for e-commerce companies often comes during the holiday season. But for Groupon (GRPN[1]), that has not usually been the case.

That’s because the GRPN business was originally built around daily deals. Over the past year, though, Groupon has been moving away from this focus and is getting a bigger share of its revenues from selling goods directly to consumers.

Already, this has helped Groupon stock more than double in value since the start of 2013. But on top of that, it could mean GRPN stock is in for a nice boost in the fourth quarter.

The GRPN Stock Turnaround

This transition towards direct selling has been part of one tumultuous course for Groupon, both as a company and in terms of GRPN stock. Not long ago, Groupon was the laughing stock of the tech world, while the company’s former CEO, Andrew Mason, acted more like a comedian than the leader of a major corporation.

The result was that Groupon earnings often missed Street expectations and GRPN stock continued to lose more and more value. Groupon stock hit the public market in late-2011 at $20 per share … and had sunk below $3 per share by the end of 2012.

In late February of this year, though, Mason lost his job and co-founder Eric Lefkofsky took the helm. And the new GRPN CEO wasted little time getting things back on track. In fact, Groupon stock has regained a good chunk of its lost ground under his tenure, as shares of GRPN went climbed from $4.58 to $10.

As should be no surprise, a big part of Lefkofsky’s efforts has been on stabilizing the GRPN organization. He has taken swift actions to cut costs and to centralize the company’s information technology systems across the world. Such endeavors are never easy — and fraught with risks.

But Lefkofsky has managed to tread carefully and be sure to avoid neglecting other key parts of Groupon, such as the mobile business. In fact, mobile has been another huge drive of GRPN stock. According to the latest Groupon earnings conference call, the company is now the largest mobile e-commerce player in the U.S., with about half of all transactions coming from Apple (AAPL[2]) and Google (GOOG[3]) devices. It certainly helps that GRPN also has leveraged some of its advantages like a massive sales force, a massive user base and growing database of deals.

It also looks like acquisitions will be an important part of the turnaround strategy as well. One spot-on deal came in Q3 with the purchase of Ticket Monster, which is a top local e-commerce operator in Korea. The company should represent a nice way to get a bigger piece of the valuable Asian market, which could be another catalyst for more GRPN stock gains.

For the cherry on top, Lefkofsky has also been doing the heavy-lifting of changing the core business model of Groupon, as we mentioned. His vision is to make the company the destination for getting big discounts on a wide assortment of services and goods — anytime, anywhere. So instead of spamming users with daily emails, the goal is to get them to check their smartphones to search for deals from GRPN.

To pull this off, Lefkofsky has been borrowing from the Amazon (AMZN[4]) playbook. To this end, the company announced the opening of a fulfillment center[5] in Hebron, Ky. This type of infrastructure is crucial, especially since consumers have come to expect speedy delivery.

More Upside This Holiday Season

Considering all these changes in the Groupon business model, the company looks perfectly positioned for a holiday boost. As a result, GRPN stock could be a very smart buy for the coming months.

The potential for Groupon is especially strong considering the fact that consumers are still feeling the pressures of a slow economy. That’s good new for GRPN stock investors, since penny-pinching consumers will probably want to look for cut-rate deals. Groupon has now made it much more convenient to do so.

This new strategy could fail, of course — as is the case with any big-time business change. Besides, GRPN also faces tough competition from players like eBay (EBAY[6]) and Amazon. When it comes to e-commerce, both leaders have a habit of killing off the competition … or at least inflecting painful wounds.

Plus, even Google is becoming a problem. The company has continued to plow resources into building a local e-commerce platform … and it has some huge advantages. A few include Google’s massive Android mobile platform and its myriad of online services. Plus, GOOG recently started using Gmail to provide users with e-commerce deals and it looks like this move has put some pressure on GRPN.

Despite all this, GRPN stock still looks attractive, both because of its business shift and the holiday opportunity … and in terms of the stock’s valuation. Groupon stock is currently trading at a price-to-sales ratio of 2.85X, which is dirt-cheap compared to other mobile-focused operators. Facebook (FB[7]), for example, goes for a multiple of 16 and Twitter (TWTR[8]) has a multiple of 42.

So for investors looking for an affordable way to get into the mobile game, GRPN stock looks is a solid option. And once you consider that Groupon has been making smart moves to transition its business, there’s especially good reason to bet on GRPN during the holiday season.

Tom Taulli runs the InvestorPlace blog IPO Playbook[9]. He is also the author of High-Profit IPO Strategies[10], All About Commodities[11] and All About Short Selling[12]. Follow him on Twitter at @ttaulli[13]. As of this writing, he did not hold a position in any of the aforementioned securities.